Why Knowing your TAM is Critical for a B2B Business

In today’s increasingly complex business environment, arming your sales and marketing professionals with relevant market intelligence is critical for success. One of the most fundamental pieces of information that a sales and marketing team should have is an idea of the Total Addressable Market (TAM) that they serve. This is crucial for effective planning and measuring progress, and yet, because finding and defining TAM is seen by many as a long and difficult task, they neglect gathering this information that provides the very outlines of the roadmap to their success.

B2BSignals’ Head of Sales, Jeff Leroux, states that the goal of defining TAM should be to “provide target market guidance to your sales & marketing teams on how and where to expend limited resources for market development.”

Even if there is limited data available, here are 3 alternative ways to efficiently determine TAM for your B2B market segment or product:

Revenue of industry or competitors

If your product is a CRM product, knowing how much revenue your direct competitors make would be a good place to start to determine your TAM. For example, if you have built a new CRM that is specifically targeting SMBs, finding the revenue of other competitors that are targeting the same segment would be useful. If there are 3 competitors in your space, and each one has about 10 million in revenue, then you can assume your TAM would be roughly around 30 million dollars in size. For public companies, these revenue numbers are somewhat easy to find. If they are not easily available in sites like Morningstar or Bloomberg, trying to read through the 10K may give more detailed revenue numbers. For private companies, finding revenue is a lot more tricky. Some sources such as Crunchbase and Inc 5000 may have this data, or at least a range, which can be used as an approximate revenue number.

Users of similar products or complementary products in the market

Another alternative to determine TAM is to understand how many users of similar products there are, rather than using an absolute revenue number. If your direct competitors as a CRM are Microsoft Dynamics and Oracle Siebel, and you have found that there are 5,000 companies using Microsoft Dynamics and 2,000 companies using Oracle Siebel, then a TAM of 7,000 companies would be a reasonable estimate. You can design your strategy then accordingly based on those 7,000 companies.

Alternatively, you may also use users of complementary products to determine TAM. For example, if your product is a new marketing automation product that integrates seamlessly with Microsoft Dynamics, and there are 5,000 companies using Microsoft Dynamics, then this would be a practical measurement of TAM to start with.

It is important to note that in addition to using “users” or “products installed” to determine TAM, you must also consider layering in additional firmographics and demographics as needed to have a better estimation of TAM. For example, if your product is specifically designed for a financial services firm with 1,000+ or more employees, ensure that this parameter is applied as you estimate your TAM. On demand B2B data platforms would have products installed or technographic information as well as the appropriate filters in order to broaden or narrow your search.

Targeted segments of B2B buyer personas

Targeting segments of B2B buyer personas is another alternative to determine TAM. This is especially useful if your B2B product is primarily being used by specific buyer personas. For example, going back to our CRM example, certain personas would be the ideal prospect for a new CRM product, such as sales operations, marketing operations and CRM administrators. Searching for contacts with these roles, and layering in a seniority filter as well as a company size filter (and sometimes an industry filter as well) will provide indicative numbers on TAM. Layering in a company size and industry filter becomes important because some B2B products are designed for a specific company size or industry. B2BSignals provides easy ways to layer in these filters to help you determine your relevant TAM.

Finding and defining TAM does not need to be a daunting process for your sales or marketing team. These practical and simple alternatives can give you a good starting point and allow your team to move ahead with strategy and execution without spending countless hours on research.

Jean is part of the B2BSignals product team and contributes to product marketing, product positioning and messaging, competitive intelligence, sales enablement, product strategy and content marketing. She is also part of the team developing Market Insights, B2BSignals' new and exciting product feature that allows high level marketers to spot never before seen insights and opportunities within their market.